Correlation Between US Treasury and US Treasury

Can any of the company-specific risk be diversified away by investing in both US Treasury and US Treasury at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining US Treasury and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Treasury 6 and US Treasury 12, you can compare the effects of market volatilities on US Treasury and US Treasury and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in US Treasury with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and US Treasury.

Diversification Opportunities for US Treasury and US Treasury

0.99

Correlation Coefficient

US Treasury  US Treasury

No risk reduction

The 3 months correlation between XBIL and OBIL is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 6 and US Treasury 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 12 and US Treasury is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US Treasury 6 are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 12 has no effect on the direction of US Treasury i.e., US Treasury and US Treasury go up and down completely randomly.

Pair Corralation between US Treasury and US Treasury

Given the investment horizon of 90 days US Treasury is expected to generate 1.02 times less return on investment than US Treasury. But when comparing it to its historical volatility, US Treasury 6 is 1.61 times less risky than US Treasury. It trades about 0.74 of its potential returns per unit of risk. US Treasury 12 is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  4,965  in US Treasury 12 on December 27, 2024 and sell it today you would earn a total of  51.00  from holding US Treasury 12 or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

US Treasury 6  vs.  US Treasury 12

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 6 are ranked lower than 58 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

US Treasury 12

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with US Treasury and US Treasury

The main advantage of trading using opposite US Treasury and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, US Treasury can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in US Treasury will offset losses from the drop in US Treasury's long position.

The idea behind US Treasury 6 and US Treasury 12 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.